FAs Reveal Secrets to Winning and Advising Americans Abroad

Advisors can build a business with clients shunned by other FAs if they work with Americans living abroad, experts say. There are about nine million American citizens living overseas and few FAs competing for their business, Gabrielle Reilly, senior wealth advisor of Reilly Financial Advisors, which oversees $1.4 billion in client assets, says. But FAs building non-U.S.-based businesses face hurdles ranging from difficulties in client outreach to complex compliance issues.

Contacting potential U.S. expatriate clients is the first challenge FAs face in building a global business. American expatriates are fragmented and spread across the world, making it difficult for advisors to locate them, Reilly says. For those Americans with ties to other cultures as well, cultural differences surrounding investment are also present, with some countries even prohibiting open discussion of investment-related topics, Miguel Sosa, founding partner of Premia Global Advisors, says. These difficulties can dissuade advisors without established foreign-based client networks from entering the market as “barriers are higher than ever before,” Sosa says.

But trouble finding expatriate clients can be overcome by building your digital media presence, which Thun Financial Advisors uses to reach potential U.S. expatriate clients, according to founder David Kuenzi. Thun Financial, which oversees $420 million in assets, uses its corporate website, LinkedIn, Facebook, and webinars to release content addressing common investment troubles Americans abroad face. After seeing Thun’s online content and insight into their issues, expats reach out to Thun for advisory services, Kuenzi says. “We can acquire clients without [meeting] them in flesh and blood” by providing investment information online, he says.

FAs targeting foreign-based Americans also receive steady client growth rates because of expat word of mouth, Sosa says. Premia Global, which has $205 million under advisement, has seen its client base steadily grow because it has an established reputation for advising U.S. expatriates, giving them greater exposure, Sosa says. Reilly Financial Advisors also gains expatriate clients from being sought out by people wanting their experience in the foreign advisory market, Reilly says.

Yet once expat clients have been engaged, effective client communication with persons halfway around the world in different time zones can be a challenge. But it is essential to working with foreign-based clients, Reilly says.

To beat the time and distance gap, FAs advocate communicating outside of traditional phone calls. Premia Global checks for clients' preferred methods of communication and uses technology – such text messages, WhatsApp, or email – to customize how they connect, Sosa says. FAs must be open to using technology to bridge the distance gap and cater communications to each client’s needs, both Sosa and Reilly say. But it is important to understand how regulations impact client communication modes. Both Finra and the SEC require advisors to keep a permanent record of client communications. For such circumstances, Brian McLaughlin, CEO and chief technology officer at Redtail, says advisors can use text-tracking applications.

Reilly Financial Advisors also places advisors across the Middle East and Europe to eliminate time zone difference issues. Some FAs are based in the U.S. and make regular trips abroad, but Reilly says the best way to communicate and serve clients is to have people in each region.

Yet one of the most challenging aspects of working with clients abroad is dealing with foreign tax and regulatory laws, FAs say. Americans abroad “are subject to two taxations at the same time” – U.S. tax laws and the laws of their current host country, Kuenzi says. Tax and regulatory laws also drastically differ around the world, making it hard to understand how the two systems interact, he says. For example, in Saudi Arabia there is no income tax law and in Europe there are entirely different tax laws than the U.S., Reilly says. Working with Americans abroad means balancing both American and foreign laws, which requires tremendous resources.

Taxes are also growing more complex around the world because the Foreign Account Tax Compliance Act (FATCA) requires U.S. citizens in and outside of the U.S. to file annual reports on their foreign holdings. And despite FATCA not saying, “you can’t work with Americans abroad,” Kuenzi says the law has made U.S.-based financial institutions more compliance-focused globally and spawned common reporting standards.

To work in an increasingly compliance-driven global environment, Reilly Financial collaborates with lawyers local to expatriate clients because such attorneys know the host countries' laws best. Kuenzi also says partnerships with local lawyers are particularly important for estate planning, which can involve “very complex” resident alien laws. To navigate these laws, Thun Financial collaborates with foreign lawyers and accountants, acting as the common denominator across all aspects of advisory issues, he says.

Miguel Sosa

Asset custody also presents an issue for American FAs with clients living abroad. Over the last decade fewer custodians have become willing to accept clients from international jurisdictions because regulation has tightened, Sosa says. But such custody issues are not significant problems for firms with long tenures and histories in the market. Reilly Financial uses established partnerships to find custodians for client assets and Premia Global relies on relationships formed from years of advising foreign clients. Yet for firms looking to enter the expat advisory market, engaging custodians may prove challenging. FAs experienced in the field recommend extreme due diligence in this area.

It takes extra work on all sides of the business to deal with clients living abroad, Reilly says, and some advisories are closing such accounts in a bid to limit their own liabilities and regulatory risk. Changes in regulation and ongoing concerns about violating securities laws in particular have made large wirehouses, such as Merrill Lynch and Morgan Stanley, effectively leave foreign clients behind, according to news reports. This follows a global trend Sosa sees of more advisors leaving international business than entering it. Reilly says the trend exists because working with clients living abroad can be expensive, time-consuming, and presents a risk to an advisor’s business if the FA is inexperienced. Merrill Lynch and Morgan Stanley declined comment.

Yet FAs experienced in handling U.S. citizens living abroad are in a unique position to win clients from which other institutions are shying away, Sosa says. In addition to being able to win clients others can’t service, Reilly says it’s rewarding helping clients that can often feel hopeless about their finances. “No matter where you are, you should get great financial advice,” she says.